If you’re looking for ways to save significant money on your monthly electricity bill, you may have come across solar power as a viable option. If you didn’t pull the trigger, it’s probably due to the high initial price tag.
While it’s true that solar panels are a sizable investment, the savings they offer more than make up for it. However, before you commit to such a big purchase, we’re here to answer a few key questions. For instance, how long does it take to see the benefits of solar power? Read on to find out!
What Is a Solar Payback Period?
Almost all investments have a “break-even” point, a moment that tells you you’ve made back the initial investment and signifies that all further growth is profit. A solar panel system is no different; depending on a few factors, you can estimate how long it will take for you to make back your investment in electricity savings and start making money!
The average American household pays off their solar panels (in energy savings) within the first decade of the system’s use. Since most solar panel systems have a lifespan of 25 years or more, that equates to at least 15 years of profit!
Calculating Solar Payback
There are several factors to consider before you can determine your solar payback period, including both costs and savings. Keep reading to learn all the pieces you must take into account!
Cost of Your System
The most obvious consideration is the cost of your system! It’s also the most significant expense you’ll need to worry about. The system cost comes down to a few things, including the size of your system, the equipment you require, and the labor involved. Contact a solar installer near you and ask for a quote on all these factors—they’ll help you determine what size system you need for your home’s setup!
Remember that the government supports solar power on almost all levels, including federal, state, and local! For that reason, you can use several financial incentives to reduce the cost of your system or earn rebates and tax credits. You should look up your state and local incentives to learn how much you can save; don’t neglect this step! It can result in hundreds, if not thousands, in savings.
Average Monthly Electricity Use
Not every household requires the same amount of electricity. For that reason, you may end up saving more or less money with solar power depending on your monthly usage! People who use more electricity can save more money; however, they’ll also require a larger solar panel system during the installation process.
If you and your family don’t use much electricity in an average month, your potential savings may be lower. However, keep in mind that your energy requirements may differ throughout the year. If you need to cool your home in the summer but don’t need to warm your home much in the winter, your summer and winter electricity needs will look vastly different.
Your best bet is to take a full year of energy statistics and average them to determine your normal monthly usage, rather than only considering the past few months.
Estimated Electricity Generation
Along with the quote for your system’s overall cost, a solar installer will also tell you your estimated electricity generation. The solar installer will determine this number based on a few variables, including the number of panels your roof can fit, any nearby trees that may reduce sunlight on your roof, seasonal weather patterns, and future increases in energy demand.
Once you have all these numbers calculated, it’s time to break out a formula! The first step is determining the combined costs. To do so, take the cost of your system and subtract any incentives. For example, if your system will cost $28,000 and you can earn $10,000 in incentives, your combined costs equal $18,000.
Next, you must figure out your yearly benefits. This includes any ongoing incentives and your estimated savings per year. Let’s say you have $1,300 in annual incentives and $1,100 in savings per year. Your combined annual benefits are $2,400.
Finally, divide the combined costs by your annual benefits to get your estimated payback period. Continuing with the example above, that would be $18,000 divided by $2,400, or an estimated payback period of seven and a half years.
Since solar panels have a lifespan of 25 years or more (and most solar installers will offer a warranty of 20 years or more), the question is: what is a reasonable period to make back your investment?
The average household saves the cost of solar panels after a decade of use, and 12 and a half years is the halfway point of a system’s 25-year lifespan. For that reason, you have a reasonable payback period if it’s less than 12 and a half years long. That puts your payback period at the average or slightly above average timeframe, meaning you have over 10 years of profit!
While there are several factors that can shift your payback period forward or back, the equation written above should give you a generally accurate sense of when your system will make back your initial investment. If that final number is 12 and a half years or less, consider contacting a solar company in El Paso to begin your savings journey!
Don’t Expect Too Much Too Soon
Patience is a virtue, and that old chestnut is no truer than with solar panels! Almost every solar panel system will make its money back, so you can sit back and let the savings come to you. Understandably, you’d want to see massive gains right away after such a large investment, but slow and steady wins the race. If you expect too much too soon, you’ll be disappointed.
Now that you know how long it takes to see the benefits of solar power, you know that sooner or later, solar panels will save you money. Whether you’re willing to invest to enjoy the savings is up to you!